Historically, periods of great technological advancement have also delivered correspondingly significant GDP growth. Over this decade, we’ll experience more technological progress than in the past 100 years put together, innovator Peter Diamandis wrote in his 2019 book, as a potent mix of technological advances reshapes a wide range of industries.
Massively enhanced computer power, as processors become ever faster and cheaper, is making technology increasingly capable. Simultaneously, some technologies are converging (think artificial intelligence and robotics), while our access to technology is also expanding. These trends are propelling startling breakthroughs, delivering astonishing new product and service functionalities, and providing an irresistible foundation for the reinvention of companies, industries, and markets.
As part of the drive to create the Thailand 4.0 economy, tech sectors feature prominently among the Thai government’s areas of focus aimed at boosting productivity and growth. That said, today’s era of unprecedented technological leaps presents a challenge for business leaders. How can they best understand the advances that will matter most? Just as importantly, how will companies capitalize on these trends to innovate, boost performance, and create value?
Three rapidly emerging technology growth engines are likely to be especially significant on the route to achieving these goals: cleantech, future of connectivity (5G and IoT), and distributed infrastructure (cloud and edge computing). Progress and expansion within these areas will be vital to value creation within the all-important service economy as well as in the manufacturing sector.
Cleantech
A key engine of progress will be clean energy in an economy where over 60 percent of energy is imported and fossil fuels account for around 87 percent of power-generation sources. In response, Thailand is stepping up investments in low-carbon technologies within its power and transport sectors as part of the government’s Alternative Energy Development Plan (AEDP) 2015 – 2036. The goal is to ensure that 30 percent of primary commercial energy comes from alternative and renewable resources by 2036.
As cleantech comes down the cost curve, it becomes increasingly disruptive to traditional business models, affecting both industry structure and market dynamics. To keep pace, companies can focus more on emerging business-building opportunities; improve performance standards that accelerate adoption of cleantech; design operational improvement programs related to the technology lifecycle; and consider how climate-change mandates affect energy costs and alter the balance sheet of carbon-intensive sectors.
Future of connectivity
Connectivity is of course a key area of opportunity and two technologies—5G and the Internet of Things (IoT)—have the potential to be especially significant for Thailand, driven by increasing consumer acceptance and demand.
In Thailand, 5G ultra-fast mobile broadband that offers 100 times the bandwidth of 4G is set to skyrocket, with the number of smartphone users adopting the technology (especially young parents and metro residents) growing rapidly and the nation’s top telecommunications operators investing billions to prepare.
In business, super-fast 5G connectivity (and Internet) has broad implications for organizations, supporting the creation of new services and business models linked to sensor-enabled intelligent products, and yielding new value-chain offerings (such as predictive services, personalized customer offerings, and omnichannel experience).
In mobility, for example, IoT sensors and near-global coverage can help manufacturers capture vehicle signals, monitor the condition of each system in the car, and notify the owner to schedule repairs before a breakdown occurs, improving the vehicle’s durability and lifespan.
Distributed infrastructure
Cloud computing, where the global market is expected to grow by 15 percent annually over coming years, and edge computing (computing outside datacenters that requires local real-time processing of data generated by sensors or users), are key components of modern digital infrastructure—especially IoT.
Consumer sentiment is accelerating digital transformation in Thailand (especially since the onset of COVID-19) and fueling adoption of cloud-based services, driving demand for data centers. A 2021 report by Research and Markets expects Thailand’s data-center market to gain investments of US $1 billion by 2026, when the country’s cloud computing market is expected to hit some US $700 million (with 8 percent CAGR over the period 2021–26).This trend will open up IT infrastructure and computing power, triggering a shift in importance away from traditional IT capabilities towards software development skills and the talent required.
As companies pivot away from more traditional on-premise IT models, there will likely be a corresponding move to cloud-enabled “as a service” delivery. This transition paves the way for more modular configurations for business organizations built around “platforms” of activities and technology that target specific business goals: including digital transformation, new talent requirements (more system architects, for example), lower costs, and greater innovation.
How can companies prepare?
When considering where and when to invest in response to this unfolding picture, companies in Thailand need to pay attention to three primary issues—the scale of the impact of the specific trend, its technical maturity, and the organizational fit of the technology. Executives can ask themselves several questions in relation to these three points:
- Scale of the impact. How important is this trend for my industry or company? Will this technology fundamentally disrupt existing value pools? Will implementing these technologies give the company a competitive advantage?
- Technical maturity. How fast do we need to react? Bearing in mind that front runners in tech adoption capture the most benefit, executives need to consider when is the right time to scale any of the technologies given their level and speed of maturity.
- Organizational fit. How do we approach the technology implementation and operationalize technologies to capture value?
In tandem, business leaders also need to factor in potential associated risks across five principal areas: business, society, operational, compliance, and legal.
The scope and scale of the technological advances on the horizon are unprecedented. They open up exciting opportunities in Thailand, but also require both businesses and whole industries to prepare. The emerging winners will be those organizations able to harness these technological advances to innovate, reinvent themselves, and transform their performance.
Noppamas (Yam) Sivakriskul is a senior partner at McKinsey & Company and managing partner for Thailand, and Harry Seip is a partner and leader of the firm’s digital and analytics practice in Thailand.
For further information please contact Alan Laichareonsup at email: Alan_Laichareonsup@mckinsey.com
Series Editor: Christopher F. Bruton, Executive Director, Dataconsult Ltd, chris@dataconsult.co.th Dataconsult’s Thailand Regional Forum at Sasin provides seminars and extensive documentation to update business on future trends in Thailand and in the Mekong Region.
